BRAZIL: Looking for Unlost Electoral Causes

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Dec 7 2005 (IPS) - Brazil’s economic slowdown has joined forces with the corruption scandals to threaten President Luiz Inácio Lula da Silva’s chances of re-election in October 2006, leaving progress in the fight against social inequality as his only electoral banner still waving.

Everything that happens in Brazil today, be it new revelations about corruption or economic statistics, matters not just in and of itself, but as an element influencing the electoral debate.

Against that backdrop, the1.2 percent dip in gross domestic product (GDP) in the third quarter of this year, compared to the same period last year, dealt a further blow to the hopes of President Lula and his leftist Workers’ Party (PT) of remaining in power.

But the electoral banners seem to have changed hands. The conservative opposition, which tried to block Lula’s victory in 2002 by trumpeting the risks of economic instability if a leftwing government were elected, can now resort to speechifying about corruption, when the anticorruption platform was previously a monopoly of the PT.

The scandal that broke out in May and revealed illegal campaign contributions and alleged bribes of legislators destroyed the PT’s image as an ethical party.

If the economy remains stagnant for a few more quarters, Lula and the PT will also lose the ability to tout Brazil’s economic recovery. GDP grew by 4.9 percent in 2004, but this year’s figure will amount to just over half that, analysts project. That is much lower than the GDP of several neighbouring countries, and far below what might be expected given the current strong performance of the international economy.

For this reason pressure has intensified within the government itself against Lula’s economic policy, based on tight public spending and high Central Bank interest rates, which now stand at an annual 18.5 percent.

At least the government recently received one piece of good news in its favour: the reduction of poverty and social inequality in 2004.

Three million people have been raised out of absolute poverty, celebrated the minister of Social Development, Patrus Ananías, referring to the results of the National Household Sample Survey, carried out annually by the Brazilian Institute of Geography and Statistics (IBGE).

The proportion of Brazilians living in extreme poverty – defined in Brazil as those who cannot afford an adequate diet – dropped from 27.26 to 25.08 percent of the population in 2004, according to Marcelo Neri, an economist who specialises in social questions at the Getulio Vargas Foundation in Rio de Janeiro.

That means eight percent of the 40 million people who were living in extreme poverty in 2003 have pulled out of that category.

One-third of this improvement was due to the 4.9 percent economic growth and two-thirds to the narrowing of the gap between the rich and the poor, which has finally begun to close slightly after three decades, said the researcher, who predicted that this could be the decade of reducing inequality in Brazil.

Based on the United Nations criteria that follows the World Bank definition setting the extreme poverty line at a dollar a day, Brazil has apparently met the first of the eight Millennium Development Goals: cutting extreme poverty levels by half between 1990 and 2015, said Neri.

According to this more narrow definition of extreme poverty, 12.41 percent of the Brazilian population fell into that category in 1993, a proportion that has fallen to less than half of that this year. The economist reckons that poverty reduction in 2005 will be similar to that of last year. Although the economy will grow at a slower pace, he said, the minimum monthly wage has been increased by nine percent and the government has expanded its programme of “family grants.”

These monthly stipends of 15 to 95 reals (6.80 to 43 dollars) for poor families who keep their children in school – the government’s main social programme – are largely responsible for narrowing the gap between rich and poor over the past two years, said another expert, Ricardo Paes de Barros with the Planning Ministry’s Institute for Applied Economic Research.

His conclusion is based on statistical data from IGBE, which reveals that between 2002 and 2004 the number of families receiving income in the form of rental payments, financial investments, dividends, and “other” unidentified sources increased from 13.7 percent to 24.4 percent. The “other” income includes the family grants.

The programme assisted 6.57 million families in 2004. The goal is for it to reach 8.7 million families this year, and 11.2 million families by the end of Lula’s term in December 2006.

The recipe for fighting poverty is to reduce inequality and promote economic growth, according to Barros.

Lula, however, has stated that unsatisfactory economic results are not a barrier to social progress, ignoring the fact that unless a large number of jobs can be generated, the country’s social wounds will not close.

A majority of economists in Brazil are critical of the Central Bank’s extremely high interest rates, including those who support the policy of setting targets for inflation.

Treasury Minister Antonio Palocci is now in a weaker position to resist the generalised pressure to ease monetary policy, loosen the fiscal screws and increase spending. On top of the fall in GDP growth, many of his former advisers are involved in corruption scandals and he himself is facing a possible investigation.